Banking

State Street to buy Intesa Sanpaolo unit for $1.9 billion

Plans to inject further $800 million of capital; deal will boost non-U.S. revenue

By

SimonKennedy

LONDON (MarketWatch) -- State Street Corp. said Tuesday it's purchasing the securities services arm of Italian bank Intesa Sanpaolo for 1.28 billion euros ($1.87 billion), a deal that will further expand the buyer's international presence.

State Street
STT, -1.34%
said it will also inject about $800 million in additional capital when the deal closes sometime around the second quarter of 2010.

The division being acquired includes Intesa Sanpaolo's global custody and fund administration operations as well as depository and correspondent banking units.

It's expected to generate revenue of around $427 million in 2009. The majority of that comes from Italy, but around 20% was generated through offshore-fund servicing in Luxembourg.

"This transaction is consistent with our long-term strategic plan to increase State Street's scale and presence in high-growth markets outside of the U.S." said Jay Hooley, president and chief operating officer of Boston-based State Street.

"It will also provide State Street with access to a new customer base to which we can cross-sell additional products and services and will give us additional traction in the insurance market," Hooley added.

State Street, which has a long-term goal of generating half its revenue from outside the U.S., said the deal will lift non-U.S. revenue to about 38% of the company's total from 35% in 2008.

In a separate statement, Intesa Sanpaolo said the local custody business, which handles the custody and settlement of Italian securities, is not included in the deal. The bank said that it will book a gross capital gain of around 740 million euros and that its core Tier 1 capital ratio will rise by 0.37 percentage points.

For its part, State Street said that it will finance the deal through available capital and that its capital ratios would remain strong after the deal.

The deal will result in integration costs of about $120 million over five years and is projected to yield some $90 million in cost savings over the same period.

Excluding the one-time costs, State Street said it expects the deal to be "modestly accretive" to earnings in 2010.

The Intesa Sanpaolo business had average assets under custody of around $500 billion in the first half of 2009 and around $200 billion of assets under depository bank services.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information.
All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only.
Intraday data delayed at least 15 minutes or per exchange requirements.